First Home Loan Deposit Scheme

We have seen a slow down in property transactions of late, particularly first home buyers due to concerns around the economic uncertainties we are facing as a result of COVID-19.

Some good news, which may see some potential buyers reconsider their position is the Federal Government’s First Home Loan Deposit Scheme (FHLDS) which will release the next round of 10,000 FHLDS application spaces on 1 July 2020.

The FHLDS took effect on 1 January this year and is specifically designed to help first home buyers. Ordinarily when purchasing property if you require finance of greater than 80% of the value of the property, you would need to take out Lender’s Mortgage Insurance with your bank. Lender’s Mortgage Insurance can cost thousands of dollars. Under the FHLDS, the Australian Government will guarantee 10,000 low-deposit loans each financial year for low and middle-income earners who have a deposit of as little as 5% of the property’s value.

In order to qualify for the FHLDS you must:

  • Be an Australian Citizen;
  • Not have a taxable income of more than $125,000 for a single or more than $200,000 for a couple;
  • Not have owned a property in Australia, an interest in a lease with a term of over 50 years or a company title interest in land in Australia;
  • Be over 18;
  • Have at least 5% of the value of the property saved as deposit; and
  • Move into the property within 6 months from the date of settlement and continue to live in the property for as long as your home loan has a guarantee under the Scheme.

There will be another 10,000 spaces released on 1 July 2020 and therefore could be the ideal time to enter the property market if you are eligible for the FHLDS. You may also be entitled to other concessions which could ease the up-front costs associated with property investment, for example the first home buyer stamp duty concession or first home owner grant.

While the FHLDS has continued to operate and accept applications from first home buyers during COVID-19, the pre-approval period during which an eligible first home buyer must enter into a contract for sale after receiving finance pre-approval under the FHLDS has been extended amid COVID-19. Initially, a first home buyer under the FHLDS was required to enter into a contract for sale within 90 days from the date they were first-approved under the scheme. However, this period has been extended by a further 90 days (for a total of 180 days) given the social distancing and other requirements currently in place. This extension will give first home buyers and lenders flexibility and support to deal with the evolving COVID-19 situation.

If you or someone you know is interested in finding out more about the FHLDS, please contact the Property Team at Osborn Law on (02) 4927 2900.